How Can Industry Improve Prevention and Avoid Risk

Li Yizhong, member of the Standing Committee of the National Committee of the Chinese People's Political Consultative Conference, deputy director of the Economic Committee of the National Committee of the Chinese People's Political Consultative Conference, and former Minister of the Ministry of Industry and Information Technology, in the speech on "Practical Industry Cooperation, Prevention of Investment Risk, and Road to Building and Prospering", on the "Belt and Road" in Industry and Manufacturing I gave my own advice on how to carry out industrial cooperation and how to improve prevention and avoid risks.

Li Yizhong pointed out that industrial and manufacturing industries should promote the construction of the “Belt and Road” and rely on project-driven and deep-rooted cooperation in production. Specifically, we must do a good job in five aspects of cooperation: first, to carry out infrastructure construction such as transportation, telecommunications, and pipe network; second, industrial manufacturing to go out to invest in industrial projects and promote industrial cooperation; third, extensively carry out engineering Contracting and labor cooperation; Fourth, providing strong support for foreign trade; Fifth, giving full play to advantages and going out to carry out resource cooperation.

Then, how can industry and manufacturing improve their ability to prevent and avoid investment risks in the process of going global?

Li Yizhong believes that there are four risks in foreign investment, especially in the “Belt and Road”: the first is social security risks, the second is economic law, regulations and institutional risks, and the third is capital, technology and market risks. The fourth is the risk of cultural integration and institutional integration.

In Li Yizhong's view, due to the impact of various local conflicts, investment in high-risk areas will inevitably suffer setbacks, but high-risk areas often have better business opportunities. Therefore, companies should conduct a comprehensive investigation and analysis of the potential risks of investment, and contact the government, non-governmental organizations and local organizations, and also write provisions to ensure safety in the contract.

In the face of economic laws, regulations and institutional risks, Li Yizhong pointed out that in the early due diligence, enterprises should thoroughly examine and sort out local legal regulations and policy developments, and do things in accordance with the Code of Business Conduct to prevent irregularities and illegal activities.

In terms of preventing capital, technology and market risks, Li Yizhong believes that enterprises should not blindly acquire and invest, and should understand the local resources, market, location, transportation, technical standards and social environment. At the same time, the selected project of the enterprise should be its main business and strength. It is necessary to pay attention to the advanced nature of the technology, and pay more attention to its practicability and reliability.

Li Yizhong pointed out that in terms of mitigating the risks of cultural integration and institutional integration, it is necessary to formulate a relatively perfect integration plan before and after the enterprise M&A project, including institutions, personnel, technology and equipment. Both progress and reform must be carried out, and at the same time, it cannot be rushed.

Finally, Li Yizhong said that it is not enough to rely on corporate efforts to prevent these risks, and the government should play a better role.

This was the keynote speech delivered by Li Yizhong at the 3rd “One Belt and One Road” Park Construction International Cooperation Summit held on June 25th and the 14th China Enterprise Development Forum Featured Town Investment Fair.